Court File and Parties

CITATION: Graham v. 10 Tecumseh Ave. West Inc., 2015 ONSC 2704

COURT FILE NO.: 566/15

DATE: 2015/04/24

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Paul Graham o/a Alpine Engineering (Applicant)

AND: 10 Tecumseh Ave. West Inc. (Respondent)

BEFORE: Justice B.W. Miller

COUNSEL: Applicant self-represented Todd W. Devitt, for the respondent

HEARD: April 17, 2015

Endorsement

[1] The Applicant, Mr. Graham, is the tenant of a commercial property identified as Unit 6 – 10 Tecumseh Ave West, London, Ontario (“the premises”). The Respondent is the owner of the premises.

[2] On March 19, 2015, the Respondent, through its principal Tony Moonen, served a Notice of Termination by Landlord and Claim for Damages dated March 19, 2015. It terminated the lease and gave notice that the locks of the premises would be changed by March 24, 2015 and that entry thereafter into the premises would be prohibited.

[3] The Applicant, who is self-represented, brought a motion for an injunction preventing the Respondent from changing the locks and evicting the Applicant. An interlocutory injunction was granted by Leitch J. on March 24, 2015, and proceedings were adjourned to a hearing on March 30, 2015. The Applicant was not ready to proceed on March 30, 2015, particularly because no originating process had yet been filed. Justice Mitchell continued the injunction and directed the Applicant to file a Notice of Application, which was done April 10, 2015.

[4] The matter came before me for a hearing on April 17, 2015. I reserved judgment and ordered that the injunction continue in the interim.

[5] Although not pleaded precisely, I understand the Applicant to be seeking relief from forfeiture under the Commercial Tenancies Act, R.S.O. 1990 c. L.7, s .20, on the basis that there is an agreement between the parties that the rent is not payable until Mr. Graham is successful in litigation that he is pursuing against a third party.

[6] The Respondent defends on the basis that there is an enforceable settlement agreement that is dispositive of the dispute and, in the alternative, there was no such agreement.

The Facts

[7] This much is undisputed: the premises were let to the Applicant according to the terms of an oral lease. The term of the lease is 24 months, commencing July 1, 2013 and terminating June 30, 2015, at a rent of $25,800 per annum, payable in monthly instalments of $2,150.

[8] Payments were made by the Applicant in a timely fashion up to and including the month of February 2014.

[9] Thereafter, the parties’ accounts diverge.

[10] The Applicant deposes that in March 2014, he made arrangements with the Respondent, through its principal Tony Moonen, to defer payment of rent until such time as he had been paid by a customer that owed him over $170,000 for repairs to and storage of a bus that had been modified for ‘business entertainment purposes’, provided that the vehicle remained on the premises.

[11] In support of his position, the Applicant filed two affidavits of his own as well as the affidavits of two witnesses. Raymond Turner, who sometimes worked at the premises, deposed that he was at the premises sometime in March 2014 when Mr. Moonen attended and made the oral agreement with the Applicant to defer payment of rent. He deposed that Mr. Graham advised that he was suing the owners of the bus, and proposed that he would defer paying rent until that case was resolved. If he received other income in the interim, he would use that to pay rent. Mr. Turner deposed that Mr. Moonen agreed, on the condition that Mr. Graham pay the monthly hydro bill and keep the shop in decent condition.

[12] Mr. Turner also deposed that he overheard a subsequent conversation between Mr. Graham and Mr. Turner in April 2014, where Mr. Moonen is said to have inquired about the progress of Mr. Graham’s suit against the bus owners. Mr. Graham is said to have advised that a lien was in place and that ‘the lawsuit is in the courts’. Mr. Moonen is said to have stated that ‘these things take time’, that ‘as long as the bus is still in the shop it’s ok’, and asked to be kept informed.

[13] Tahir Ahmad, who was a customer of the Applicant, stated that in May 2014 he overheard a conversation between Mr. Moonen and the Applicant at the Premises, in which Mr. Moonen asked for news of the bus and stated ‘I am not worried since you have the Bus in here, and when all is resolved and sorted out, and you get paid, I know I will get my money too’.

[14] It is Mr. Graham’s position that no payment is payable until the bus litigation is completed in his favour, no matter how long that takes, even extending past the term of the lease.

[15] The Respondent filed two affidavits from Mr. Moonen, in which he denies any agreement to defer payment of rent pending resolution of the claim against the bus owners, and states that the Appellant was in arrears in excess of $31,000 despite persistent demands for payment by the Respondent.

[16] Mr. Moonen deposes that the matter has taken on some urgency for the Respondent, in that the Respondent is in the process of selling the premises, with a proposed closing in July 2015, and needs to have all delinquent tenants evicted as a condition to closing.

[17] In December 2014, the parties retained counsel and entered into settlement discussions. The Respondent claims that there is an enforceable settlement agreement between the parties. The Applicant disputes this. The Respondent has produced correspondence said to evidence that agreement. The Applicant objects that these letters are inadmissible because they are protected by settlement privilege.

[18] Having reviewed the correspondence, I am satisfied that the correspondence (attached to the supplementary affidavit of Mr. Moonen) is properly admissible for the purposes of proving the existence of a settlement agreement.

The Settlement Agreement

[19] The solicitor for the Applicant wrote to Mr. Devitt, counsel for the Respondent, on December 15, 2014. The key provisions in that letter are set out in the first three paragraphs:

1. Mr. Graham will [sic] $20,000.00 by January 9, 2015. The target date would be January 5, 2015, but my client cannot promise this: while certain of payment on the contract, and certain of the promise to pay shortly, he cannot bind the payor to provide by that exact date. He can and does bind himself to pay earlier if the funds arrive earlier.

2. The aforementioned payment covers all rent payments and arrears up to and including December 31, 2014.

3. The tenancy will continue.

[20] Mr. Devitt replied on December 16, 2014: ‘my client hereby accepts the terms of the offer set out in your letter, without prejudice to its rights to seek recovery of the entire outstanding debt in the event that your client defaults on the payment set out in your offer. We look forward to receiving payment of $20,000 … on or before January 9, 2015.’

[21] No payment was received by the Respondent, which then issued the Notice of Termination in March 2015.

Analysis

[22] The Applicant has not, on the materials before me, met the burden of establishing on the balance of probabilities that the Respondent agreed to defer payment of rent until the conclusion of the third party litigation over the bus. I am persuaded that the Respondent agreed, for a time, to defer enforcement of the covenant to pay. In the circumstances, which includes evidence of other vacancies at 10 Tecumseh Ave. West, it is reasonable to believe that the Respondent would choose to keep a non-paying tenant for a time, in the hope that the non-paying tenant would again become a paying tenant. The alternative, it may have reasoned, would be yet another vacancy.

[23] But it is not reasonable to believe that the Respondent would have agreed to continue this arrangement indefinitely, even extending beyond the term of the lease, as suggested by the Applicant. It is not reasonable to believe that the Respondent would have, without consideration, locked itself into the position of letting the Applicant occupy the premises for perhaps years, carrying the risk that it would never be paid. And on the evidence before me, I am not persuaded that it did.

[24] Even if I am wrong, however, a binding settlement agreement as alleged by the Respondent would be a complete answer to the relief sought by the Applicant and would supersede the alleged oral agreement from March 2014.

[25] With respect to the documentation constituting the settlement agreement, there is a preliminary matter of interpreting the letter of December 15, 2014. The letter is clearly missing a word in the first sentence. There is some ambiguity in that the paragraph is referring at once to funds to be paid by the Applicant to the Respondent, and funds to be paid by a third party to the Applicant. The Respondent suggests the missing word is ‘pay’. Another possibility is that the missing word is ‘receive’, such that the first paragraph does not constitute an unconditional promise to pay, but declares an expected state of affairs: that Mr. Graham expected to receive funds by January 9, and if so, would pay $20,000.

[26] The appropriate approach to interpretation in circumstances where a party has used the wrong words (or in this case, omitted a word) is suggested by Hoffman LJ in Mannai Investment Co. Ltd. v. Eagle Star Assurance, [1997] 3 All E.R. 352 (HL), a case dealing with the interpretation of a lease, and one that has been relied on by the Ontario courts (e.g. Goodyear Canada Inc. v. Burnhamthorpe Square Inc., (1998) 1998 ONCA 6091, 41 O.R. (3d) 321):

It is a matter of constant experience that people can convey their meaning unambiguously although they have used the wrong words. We start with an assumption that people will use words and grammar in a conventional way but quite often it becomes obvious that, for one reason or another, they are not doing so and we adjust our interpretation of what they are saying accordingly. We do so in order to make sense of their utterance: so that the different parts of the sentence fit together in a coherent way and also to enable the sentence to fit the background of facts which plays an indispensable part in the way we interpret what anyone is saying. No one, for example, has any difficulty in understanding Mrs. Malaprop. When she says "She is as obstinate as an allegory on the banks of the Nile", we reject the conventional or literal meaning of allegory as making nonsense of the sentence and substitute "alligator" by using our background knowledge of the things likely to be found on the banks of the Nile and choosing one which sounds rather like "allegory".

Mrs. Malaprop's problem was an imperfect understanding of the conventional meanings of English words. But the reason for the mistake does not really matter. We use the same process of adjustment when people have made mistakes about names or descriptions or days or times because they have forgotten or become mixed up. If one meets an acquaintance and he says "And how is Mary?" it may be obvious that he is referring to one's wife, even if she is in fact called Jane. One may even, to avoid embarrassment, answer "Very well, thank you" without drawing attention to his mistake. The message has been unambiguously received and understood.

If one applies that kind of interpretation to the notice in this case, there will also be no ambiguity. The reasonable recipient will see that in purporting to terminate pursuant to clause 7(13) but naming 12 January 1995 as the day upon which he will do so, the tenant has made a mistake. He will reject as too improbable the possibility that the tenant meant that unless he could terminate on 12 January, he did not want to terminate at all. He will therefore understand the notice to mean that the tenant wants to terminate on the date on which, in accordance with clause 7(13), he may do so, i.e. 13 January.

[27] An interpreter, then, must look at the context of this correspondence and reject interpretations which are improbable.

[28] Taking the sentence in question in the context of the three paragraphs, the only reasonable interpretation is that ‘Mr. Graham will pay $20,000 by January 9, 2015.’ Indeed, this is how it was understood by the Respondent. Without this interpretation, the reference to the ‘aforementioned payment’ in paragraph 2 would be orphaned and senseless. Neither would it make sense for the Applicant to ‘bind himself to pay earlier if the funds arrive earlier’, except in the context that he has already bound himself to pay. The promise to pay is not conditional on his being paid by the third party; that payment is stated as a matter of certainty. The Respondent is not being invited to share in any risk. And the context makes clear that he is making that offer not, primarily, to secure a discount on the arrears that he owes ($21,500 will be reduced to $20,000), but because the Respondent has been pressing him for payment of arrears.

[29] The letter was unambiguous even though it was missing a key word, and was therefore capable of conveying the meaning of the Applicant and of being accepted by the Respondent, who did accept it.

[30] I therefore find that there is a binding settlement agreement on the terms of the letters of December 15 and 16, 2014.

[31] As it happens, no payment was in fact made by the Applicant, who is in default of the settlement agreement. The consequence is that the Respondent was then at liberty to enforce the lease agreement, which it did by issuing the Notice of Termination on March 19, 2015.

[32] The Applicant argued, in the alternative, that if the settlement offer was made unconditionally, then it was made by his solicitor contrary to his instructions. He could not promise to pay, he said, if he did not receive funds, and he should not be bound by the mistake of his solicitor.

[33] Be that as it may, the Respondent was entitled to rely on the representations of the Applicant’s solicitor. It is uncontroversial that a ‘principal is liable if the agent acts within the apparent or ostensible authority’ (see S.M. Waddams, The Law of Contracts (Sixth ed), 2010, pp. 183-84). The Respondent had no reason to believe that the Applicant’s solicitor was acting outside of his authority, and the Applicant is bound by the agreement that his solicitor negotiated on his behalf. Any remedy that a principal may have in such circumstances is against the agent and not the third party.

[34] Accordingly, the application is dismissed and the injunction is dissolved.

[35] The Respondent has been successful in this proceeding and shall have its costs of the hearing of the Application and of the prior appearances before Leitch J. and Mitchell J. Bearing in mind the principles enunciated in Rule 57.01 of the Rules of Civil Procedure, particularly the complexity of the matter and the amount in issue, as well as the reasonable expectations of the parties, costs are fixed at $3,000 inclusive of disbursements and taxes. Accordingly, the Applicant is ordered to pay this amount to the Respondent within 30 days of the date of this endorsement.

“Justice B. W. Miller”

Justice B.W. Miller

Date: April 24, 2015